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Biopharma Investors: Trump Not Only Reason for Startup Slowdown

Biopharma venture capital investors are less certain than those in high tech that
concerns about President Donald Trump’s policies are to blame for any drop in startup
deal-making.

Tech startup deal-making fell 37 percent since a high in December 2016, Bloomberg
Technology reported on Feb. 27. Venture capital executives working with tech companies
attributed this drop at least in part to uncertainty about the new Trump Administration.

VCs associated with biopharma startups acknowledged uncertainty about what the new
administration will do, but were less convinced of its impact. “There may be a slow-down
in new biopharma investment as people are trying to figure out what President Trump
wants to prioritize,”
Caleb Winder, managing director of Excel Ventures Management, told Bloomberg BNA in
a March 1 phone interview. “But deals are being made, and things feel better than
they did a year ago.”

David Berry, a general partner at Flagship Pioneering, told Bloomberg BNA by phone
March 2: “As far as day-to-day is concerned, nothing has happened yet to negatively
impact biopharma investment decisions. For therapeutics, there’s no sign that it’s
going to get any harder for investments. In fact, conversations are going on that
could take us into interesting places.”

Biotech Investing Slowdown

Data from the National Venture Capital Association and Bloomberg Finance L.P. document
a slowdown in biopharma startup investing starting in 2016, and possible signs of
renewal.

The
PitchBook-NVCA Venture Monitor characterized biopharma investing as “healthy”
in 2016, with VCs putting $7.8 billion in biotechnology and pharmaceutical companies
over 515 deals (
11 LSLR, 1/20/17
). This represented 11 percent of all U.S. VC investment, even though both deals and
dollars for the sector declined from the prior year. A
report by PricewaterhouseCoopers reached a similar conclusion.

An analysis of Bloomberg Finance data shows VC funds raised $2.4 billion for biopharmas
over the last six months compared to $1 billion in the previous six months. There
was a big jump in VC fund-raising in October 2016, a strong December and slight declines
in January and February.

Hopeful Signs?

Winder noted that when a new administration begins there is always some uncertainty.
“This time that has been combined with the surprise at the Trump victory when everyone
had been pretty sure Hillary Clinton would win and that her campaign criticism of
biopharmas would result in some negative impact on the industry. Now that Trump is
in office, I think the lack of predictability about his policies may have had an impact,
but I’m not sure how deep or long-lasting.”

Winder identified recent important biopharma deals.

On Jan. 23,
Cue Biopharma announced that it had raised $26 million in private capital led by MDB Capital Group
to help advance its work using biologics to target T cell receptors to help patients’
immune systems defeat cancer and autoimmune diseases.

Vividio Therapeutics, which is developing a proteomic drug discovery platform, announced
Feb. 3 it has raised
$50 million in its Series A financing round led by Arch Venture Partners and Versant
Ventures.

On Feb. 9,
Chondrial Therapeutics Inc., which develops
orphan drugs for mitochondrial diseases, announced it had raised $22.6 million in
a Series A financing round led by Deerfield Management.

“The biotech stock index is on a tear,” Winder said. “But biotech investment is usually
not able to take advantage of these swings in momentum. There are so many things going
on that drive investment decisions.”

IPO Outlook Complicated

Looking at the investment picture for biopharma startups, two companies—
AnaptypsBio, which is developing treatments for inflammatory diseases, and
Jounce Therapeutics, which is developing oncology therapeutics—launched initial public offerings in
January and received strong responses. Some analysts suggested this was a good sign
for other biopharma IPOs.

Braeburn Pharmaceuticals, however, dropped its IPO plans in early February, and
Visterra, which is developing an antibody for treating the Zika virus, postponed its IPO.
Bloomberg reported that biotech IPOs reached their lowest level in the last quarter
of 2016 since 2012 .

While, as Winder noted, there is a lack of certainty during every change in administration,
the transition from President George W. Bush to President Barack Obama in 2009 offers
little guidance because it occurred in the midst of a financial crisis, which put
U.S. investors in uncharted territory.

“Where we are now is that everyone is happy there is recognition that health care
is complicated,” Berry said. “There is a mixed view here in a way because everyone
has acknowledged a common goal of getting drugs to patients faster while at the same
time ensuring their safety and efficacy. At the moment, we’re mostly in a wait-and-see
position.”

“I hope when we make changes in regulations and laws we do things by increments rather
than make wholesale changes,” Winder said.

To contact the reporter on this story: John T. Aquino in Washington at
jaquino@bna.com

To contact the editor responsible for this story: Randy Kubetin at
RKubetin@bna.com

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